In Depth November 19, 2009, 5:00PM EST

These Men Could Kill SarbOx

Two tenacious Washington lawyers have the Sarbanes-Oxley Act in their sights—and they just might take it down

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Jones Day's Carvin and Francisco relish cases that could limit government Stephen Voss

By Theo Francis

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From the marbled corridors of Congress to the tony salons of Georgetown, liberal lawmakers are abuzz with ideas on how to rein in U.S. corporations. Yet over in the courts, two conservative lawyers are mounting a serious challenge to a law, enacted earlier in the decade, that imposed tough restrictions on American businesses. A ruling in their favor could deal a serious blow to the pro-regulatory movement in Washington.

Michael A. Carvin and Noel J. Francisco, partners at the giant law firm Jones Day, are taking on the Sarbanes-Oxley Act of 2002, the controversial anti-fraud legislation passed after the last big wave of corporate scandals. The two are representing Brad Beckstead, the head of a small auditing firm in Henderson, Nev., who is suing the Public Company Accounting Oversight Board, the panel created by SarbOx to make sure auditors are doing their jobs. Beckstead says the PCAOB picked apart his business in a grueling 2004 audit. "I became the poster boy for what not to do when auditing small companies," he says. The cost of complying with the rules was so great, he claims, that he had to abandon his auditing practice.

On Dec. 7 the U.S. Supreme Court will hear oral arguments in the case, known as Free Enterprise Fund and Beckstead and Watts v. PCAOB and United States of America. A finding for Beckstead could reopen the entire Sarbanes-Oxley Act. Some board defenders fear a victory for Beckstead could even shake the foundations of established bodies such as the Federal Reserve. "The implications are potentially far-reaching," says Gillian Metzger, a Columbia law professor who is supporting the PCAOB board in filings with the high court.

For Carvin, 53, and Francisco, 40, this is no ordinary case. While the two have staked out a nice business for Jones Day cutting through regulatory tangles on behalf of blue-chip companies such as Electronic Data Systems (HPQ) (EDS) and R.J. Reynolds Tobacco (RAI), they're litigating Beckstead for free. They were attracted to the case not only for its potential to bring in new corporate clients but also because it fits their political agenda. "If you believe [in] limiting government, you're much more zealous," says Francisco.

Yet that passion hasn't alienated them from Democrats among Jones Day's 2,400 lawyers worldwide. One partner who voted for Obama says he enjoys jousting with the pair over politics. "Francisco has a beautiful mind," he says. "So does Mike."

CONSERVATIVE CONSORTIUM

Carvin and Francisco are important players in what Hillary Clinton might call the vast right-wing conspiracy. They belong to an informal yet powerful web of conservative judges, lawyers, and veterans of the Ronald Reagan and George W. Bush Administrations that has been decades in the making. Even liberals admire the group's reach. "Although I disagree with these people to the core, I have a lot of respect for the way they went about cementing not just their beliefs, but the network of people who shared their beliefs," says Stephen Vladeck, an American University professor of constitutional law.

Both Carvin and Francisco boast impeccable conservative credentials, including big roles in Bush's successful challenge to Florida's Presidential vote in 2000. Francisco, a graduate of the University of Chicago law school, clerked for Supreme Court Justice Antonin Scalia. Perhaps most important, Francisco and Carvin—a law graduate of George Washington University—worked for the Office of Legal Counsel (OLC) under Reagan and Bush, respectively. The in-house law firm to the sitting Administration, the OLC's biggest job is scouring proposed laws and regulations for constitutional potholes—infringements of the President's appointment power, threats by one branch of government to encroach on another's authority, and attempts by executive branch agencies to overstep their bounds. OLC veterans include Supreme Court Justices Scalia and Samuel A. Alito Jr., as well as the late Chief Justice William H. Rehnquist, who was running the office when President Richard M. Nixon tapped him for the court in 1971.